Best of breed or bolt on?
Are you wondering whether an ERP bolt on is better value than a WMS? Often companies base their decision to use an ERP module on costs. The ERP vendor may have heavily discounted their WMS module or there is a perception it will be sufficient in the short term.
A large proportion of the customers we work with are migrating from paper based processes when they implement Indigo WMS. That’s not because they have failed to introduce technology into their warehouses, because they are almost always already using a leading ERP solution – Infor, Oracle, Sage 1000, SAP for instance. It is because they have started out thinking they don’t need a separate warehouse management system (WMS) and the bolt on module offered by their ERP vendor isn’t giving them the functionality they actually need.
Often their thinking behind the decision to use a standard ERP bolt on is to reduce costs. The ERP vendor may have heavily discounted their WMS module or there is a perception it will be sufficient in the short term. But in the long run, the total cost to your business in terms of reduced efficiency, agility and customer satisfaction could significantly outweigh the cost of implementing a dedicated WMS solution in the first place.
A question of visibility
Here is a good case to illustrate this. One of our customers is an accessories manufacturer. They had established a highly efficient B2B logistics operation and were achieving OTIF (on time in full) delivery targets and 99.9% accuracy levels for all shipments. Picking operations had already been optimised with voice directed picking, but without a dedicated WMS, they couldn’t operate a real-time supply chain. It was impossible to close the loop between what was coming off the production line and whether goods had been picked from the right location. There was an unacceptable time delay between goods being received, putaway and then available for picking – either for manufacturing lines or sales order fulfilment. After reviewing their warehouse processes in line with future business objectives, it was clear that further efficiency and cost savings could only be achieved when the company expanded by either significantly increasing headcount in the warehouse, which would be expensive, or by implementing a dedicated WMS system. They did the latter.
Benefits of a dedicated WMS
A WMS integrated with their existing ERP system would deliver the following benefits:
- more efficient raw materials floor delivery and replenishments in the manufacturing area;
- real time inventory accuracy at every location, no searching for available putaway spaces;
- optimised picking with pre-allocated travel paths to minimise time between locations;
- no time delays between inventory transactions and system updates;
- accurate cycle counting and improved stock auditing.
Overall, their WMS investment has generated significant cost savings and they have recouped their initial capital expenditure in reduced man hours required. They need fewer operatives to run the warehouse and can scale without increasing headcount.
How to evaluate what you need from a WMS
Here are some essential questions to ask when deciding whether to implement a dedicated WMS solution or compromise, with a standard module from your ERP vendor.
- How will improved warehouse efficiency help achieve your business goals – both now and longer term?
- To what extent can the ERP WMS help you communicate achieving KPIs to the rest of the organisation?
- How easily can the following key metrics be tracked? Time required to complete routine stock movements; Goods receiving and put away processing times; Stock replenishment timeframes; ‘On Time In Full’ order picking trends, pick accuracy levels and operator productivity; Stock accuracy and stock audit discrepancies.
- Will a bolt on ERP module support you in the long term? How easily can the ERP solution be adapted to reflect changing warehouse operations?
- Does the ERP vendor have the real-world warehouse management expertise to help refine existing processes during the implementation programme?
- How well does the ERP’s functionality fit your current business processes and are compromises required? Can custom functionality be easily added?#Does the ERP module support wave picking for e-commerce, perpetual inventory counting, value add packing, allergen management, compliance procedures or track and trace?
- How will you access functionality upgrades in the future? Can these be implemented without incurring extra costs?
- Can the WMS vendor support you with in-house integration capabilities, to ensure all systems can communicate in real time?
In addition to these important functional technology related questions, other important factors to evaluate relate to the culture and potential value add offered by the WMS vendor. Companies that implement a WMS do so infrequently, it’s a long-term investment and part of the decision needs to focus on the people involved. Technology functionality is extremely important but is just one aspect.
Once you have established the software capabilities will meet your requirements, consider other more intangible aspects of the decision. How well do the supply chain consultants who will potentially be working in your warehouse understand your business sector? Have they got real world experience and can they add value beyond the implementation? Can they advise you about supply chain strategy and best practice for your industry sector? How?
Customer relationships are another good indicator. Can you visit existing customer implementations and get first hand insights from long standing users? Ask existing customers whether they plan to stay with the vendor and are upgrading to their latest versions or are they migrating to other platforms. Enquire about the company culture and values. Do they reflect your own? These factors speak volumes about whether the vendor can add value as a long term technology partner and are just as important as establishing how quickly their WMS software will deliver a return on investment.